Published On: Thu, Aug 3rd, 2017

Sri Lanka Signs $1.1 Billion China Port Deal

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China Port DealSri Lanka has signed a long overdue $1.1 billion China port deal on to lease its southern Hambantota port to China ignoring a plea by opposition parties to debate the pact in parliament.

Sri Lanka Ports Authority (SLPA) and China Merchants Port Holdings signed the deal. The deal includes handling commercial operations of the Chinese-built port on a 99-year lease.

A part of the plan is to convert loans worth $6 billion that Sri Lanka owes China into equity and a China firm will hold 70% stake in a joint venture with SLPA port. Port Minister Mahinda Samarasinghe thanked China for making the arrangements with the investor to save them from the debt.

He said the Chinese firm will invest additional $600 million to make Hambantota port operational while $1.12 billion from the deal will be used for debt repayment. Hu Jianhua, the executive vice president of the China Merchants Port, said the port facilities belong to the citizens of Sri Lanka but will be a key part of China’s massive One Belt One Road initiative to build trade and transport links across Asia and beyond.

With these maritime infrastructure investments and other diverse investments such as the proposed international maritime centre, Sri Lanka will be well positioned to play a strategic role in the one-belt-one-road initiative of China.

Located near the main shipping route from Asia to Europe and likely to play a key role in China’s “Belt and Road” initiative, the Hambantota port has been mired in controversy since the Chinese firm signed an agreement to take an 80% stake in the port built for $1.5 billion.

The pact signed last year sparked widespread public anger as Chinese control of the port, which included a plan for a 99-year lease of 15,000 acres (23 sq miles) to develop an industrial zone next door, raised fears that the port could be used for Chinese naval vessels.

The Sri Lankan government has revised the deal to set up two companies to split the operations of the port and allay concerns, in India mainly but also in Japan and the United States, that it won’t be used for military purposes.

Government and diplomatic sources told Reuters that the United States, India and Japan have raised concerns over possible military activities by China in Hambantota port.

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